Apple iPhone Fate Remains Uncertain Despite Worldwide Smartphone Shipments To Grow By 5% in 2016

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According to a forecast update from research firm Canalys, the worldwide smartphone shipments are expected to grow 5% year over year by the end of 2016. Even though the global smartphone market is slowly heading towards saturation, smartphone shipments are slated to reach over 1.4 billion units in 2016. Large markets like West Europe and North America are expected to return to growth albeit, single digit percentage, in the second half of 2016, essentially due to the newer version of Apple iPhone that is expected to be released in September. However, the sales of Apple iPhone is expected to disappoint as it continues to struggle in China.

According to the research team of Canalys, Asia Pacific is holding the crown to be the most promising smartphone market. The smartphone shipments in the region are estimated to go up by 13% in 2016 as compared to the last year. India and Philippines are the green pastures for the smartphone manufacturers as the smartphone penetration in these countries are low. No wonder, the annual growth of smartphone shipments in India and Philippines are estimated to increase 21% and 26%, respectively in 2016.

The Canalys estimation on worldwide smartphone shipments in 2016 looks reasonable as the another research firm, IDC, has also estimated a 3.1% annual increase in 2016. The IDC report also highlights that in this smartphone market, devices powered by the Google Android are expected to grow 6.2% in 2016 with 1.24 billion shipments. The Android-powered smartphone shipments will further increase to 1.57 billion units by 2020. On the contrary, the sales of Apple iPhone would plummet by a considerable 2% mark in 2016 from the previous year. Apple has already posted two consecutive dismal quarters, and the firm has to reform itself to regain its prestige.

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Why is Apple Losing Grounds to Android?

The worldwide smartphone OS market has become a two player game – Android vs. iOS. Android is gaining grounds with each passing quarters in most of the marketers, pushing Apple iOS on back foot. Two dominating markets create the biggest impact – China and India.

Apple is losing its ground in the Chinese smartphone market. The company has had years of success with its emerging market in China, but with the change in smartphone market dynamics, Chinese homegrown brands, likes of Huawei, Oppo and Xiaomi, are making Apple run for its money. Huawei and Xiaomi have developed their own cheaper products with similar specifications having Apple to rethink about the pricing strategy of their flagship devices like the iPhone 6s and iPhone SE. Citing missing innovation, some analysts are betting that the upcoming iPhone from Apple would fail to impress the masses.

Besides, in a bid to push local manufacturers, the Chinese government has made the life of Tim Cook and team miserable. From weakening smartphone sales to the loss of an iPhone trademark dispute and the suspension of some of its online entertainment services, such developments has only added salt to the wounds of Apple. With 43% market share in 2015, the indigenous smartphone manufacturers in China are roaring loud and giving tough competition to Apple. In Q2 2016, 47% of the smartphone market in China has been dominated by Chinese vendors alone, while Apple captured just 7.8% of the total smartphone shipments in the country in Q2 2016, recording a disappointing decline of 31.7% year over year.

Apple is looking for a new growing market, and it has set its eye on India – the 2nd largest smartphone market in the world. As the iPhone maker is losing its grip on its strongholds, US and China, it has finally extended its reach to the highly potential market India. The country has a minuscule 17% smartphone penetration and portrays a large window of opportunity for all smartphone players.

The company’s product proposition is bafflingly simple, ‘We offer you arguably the best smartphone in the market, and you will pay as much as we ask you to’. Arrogant as it may seem, this business model worked till now. With the high-profit margin, they can quickly skim the creamy layer of the society, but the market in India is a different ball game altogether as the middle-class section of India thinks of it as “just isn’t an option”.

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India is a price sensitive smartphone market where the average selling price (ASP) of a smartphone hovers around Rs. 10,700 ($160) and comparatively iPhone’s price lingers around $660 as of June 2016. Samsung Devices are sold at an average selling price of $173 and Micromax at $86, according to Ramon Llamas, Research Manager at IDC. Llamas also pointed out that last year, 86.5% of all smartphones shipped into India retailed under $200. The iPhone SE, that was targeted at the budget smartphone buyers was still expensive in India; thus, the strategy backfired for Apple.

Apart from disputes with the Chinese Government, Apple is also facing the music from the Indian government. By banning the sales of Apple’s refurbished iPhones in the country, the government has given a big jolt to Apple’s strategy for India. Refurbished iPhones was accounted for a sizable chunk of the profit for Apple in the country. Strategy Analytics has recently reported that as a result of the ban, the sales of Apple iPhone in India have declined by 33.34% YoY in Q2 2016.

Final words

iPhone is the biggest contributor to Apple’ revenue and continues to extract far more profit. The momentum, however, in the smartphone market has been swinging away from Cupertino for the last few quarters towards Seoul. The recently launched Galaxy Note 7 pre-bookings surpassed the booking of Galaxy S7 Edge – the second most successful smartphone in 1H 2016. Encouraged by the response to its latest smartphones, Samsung is reportedly working on bendable screen smartphone. On the contrary, Apple’s next bet on iPhone failed to impress industry analysts as the upcoming iPhone is slated to house the same iPhone 6S design without much upgrades in features. Though rumours are making rounds that Apple is focused and betting big on the 10Th anniversary iPhone, which is expected to steal the show, we have to wait until 2017 to witness that. Till then, it’s going to be a tough ride for Apple apparently.

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